Lending to Non Resident Indians
A resident Indian or a company registered in India can lend to an NRI. However, the situations in which such loans can be extended and the conditions to be met are different for the two types of lenders being resident Indian and Company.
Lending by Resident Indians (Individual) to a Non-Resident Indian
A resident Indian may lend to NRI subject to the following Terms and Conditions:
- Such lending can only be in INR.
- Such lending can only be made to an NRI who is his relative.
- The loan has to be free of interest and the minimum maturity of the loan is one year.
- The loan amount should be within the overall limit under the Liberalised Remittance Scheme per financial year available for a resident individual, who shall ensure that the applicable limit is not breached.
- The utilisation of loans shall not be used for the purpose of carrying on agricultural / plantation / real estate business or for Chit fund company.
- The loan amount shall not be remitted outside India but shall be credited to the NRO account of the borrower.
- Repayment of loan shall be made by way of inward remittances from outside India or by debit to the NRO/NRE/FCNR(B) account of the borrower or out of the sale proceeds of the shares or securities or immovable property against which such loan was granted.
Lending by Companies to a Non-Resident Indian Employees
A company incorporated under the Companies Act can lend money to only those NRI’s who are its employees subject to the following terms and conditions:
- The loan shall be granted only for personal purposes including purchase of housing property in India.
- The loan shall be granted in accordance with the lender’s Staff Welfare Scheme / Staff Housing Loan Scheme and other terms and conditions applicable to its resident staff in India.
- The lender shall ensure that the loan amount is not used for the purpose of carrying on agricultural / plantation / real estate business or for Chit fund company.
- The lender shall credit the loan amount to the borrower’s NRO account or shall ensure credit to such account by specific indication on the payment instrument.
- The repayment of loan shall be made only by way of remittance from outside India or from NRE / NRO / FCNR(B) account of the borrower and by no other source.